Federal Reserve is likely to slow its rate cuts with inflation pressures still persistent
The officials are set to reduce their benchmark rate, which affects many consumer and business loans, by a quarter-point to about 4.3% when their meeting ends Wednesday.
At that level, the rate would be a full point below the four-decade high it reached in
The problem is that while inflation has dropped far below its peak of 9.1% in mid-2022, it remains stubbornly above the Fed's 2% target. As a result, the Fed, led by Chair
"We're on the cusp of a transition to them not cutting every meeting," said
The economy has fared better than officials expected it would as recently as September.
And inflation pressures have proved more persistent. The presidential election added a wild card, too: President-elect
"Growth is definitely stronger than we thought, and inflation is coming in a little higher," Powell said recently. "So the good news is, we can afford to be a little more cautious" as the Fed's officials seek to lower rates to what they consider a "neutral" level - one that neither spurs nor restricts growth.
On Wednesday, the policymakers will also issue their quarterly projections for growth, inflation, unemployment and their benchmark interest rate over the next three years. In September, they had collectively envisioned that they'd cut rates four times next year. Economists now expect just two or three Fed rate cuts in 2025.
Some economists question whether the Fed even needs to cut this week. Inflation, excluding volatile food and energy costs, has been stuck at an annual rate of about 2.8% since March. A year ago, the policymakers had forecast that that figure would have fallen to 2.4% by now and that they'd have cut their key rate by three-quarters of a point. Instead, inflation has become stuck at a higher level.
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